The US indices have risen this Friday (Dow Jones: + 1.86%; S&P: + 1.95%; Nasdaq: + 1.55%) thanks to the good employment data and despite the steep falls that were seen yesterday across the Atlantic for the disappointment Jerome Powell's appearance. For the week, the Dow Jones was up 1.83%, the S&P 500 up 0.8% and the Nasdaq down 2.06%.
The chairman of the Federal Reserve (Fed) spoke of inflation and rising bond yields, but gave no indication of how the central bank intends to curb it. Some investors expected him to signal his willingness to adjust the asset purchase program.
The economic reopening could "create some upward pressure on prices," Powell said in a webinar organized by "The Wall Street Journal." Even if the economy sees "temporary increases in inflation … I hope we are patient," he added.
Powell's words helped boost bond yields further, in turn penalizing indices. The yield of the 10-year Treasury bond it again exceeded 1.5% after their comments. The benchmark rate had stabilized earlier in the week after rising to 1.6% last week amid higher inflation expectations.
"Equity investors are dealing with two things that they haven't had to deal with in the last 10 years," said Tom Lee, co-founder and head of research at Fundstrat. "The first is the rise in inflation and its impact on the indices. The second, a bond market that is testing the Fed, which kind of scares people".
All eyes will be on today February employment report, which will be published at 2:30 p.m. Economists hope that 210,000 nonfarm payrolls added in February compared to 49,000 in January.
Investors will be equally very aware of technological values, which are also not benefited by the increase in bond yields and who they don't stop falling from highs. The Nasdaq Composite fell 2.1% this Thursday, bringing weekly losses to 3.6%. The high-tech benchmark has also turned negative for the year.
"Rates soared once again, which opened the door to more sales of technology stocks," says Ryan Detrick, chief market strategist at LPL Financial, according to CNBC. "The positive side is that the economy continues to improve and finance and energy leadership suggests this is not a sell-all time".
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